Hedgehog (Hh) signaling is required for the differentiation of mesenchymal progenitors into osteoblasts during endochondral bone formation. However, the role of Hh signaling in differentiated osteoblasts during adult bone homeostasis remains to be elucidated. In addition, Hh signaling is also required to control chondrocyte proliferation and hypertrophy. In the past year we found that in the postnatal bone, Hh signaling activity was progressively reduced as osteoblasts mature. To characterize the function of Hh signaling in adult bone homeostasis, we have manipulated Hh signaling selectively in mature osteoblasts in adult mice using the Cre-lox system. Upregulation of Hh signaling by removing Patched 1 (Ptch1), a negative regulator of Hh signaling, leads to increased bone formaion and excessive bone resorption. As a consequence, these mice show severe osteopenia. Conversely, inhibition of Hh signaling in mature osteoblasts by inactivating Smoothened (Smo), a positive regulator of Hh signaling, resulted in increased bone mass and protection from bone loss during aging. Our results demonstrate that Hh signaling is required in mature osteoblasts to regulate both bone formation and resorption and inhibition of Hh signaling protects bone loss during the normal course of aging. We have also found that Hh signaling promotes chondrocyte hypertrophy in the adult joint, suggesting that activated Hh signaling maybe a risk factor for osteoarthritis.